USA Technologies has engaged in another pact with MasterCard that will put USA Technologies’ e-Port G6 magnetic-stripe and contactless payment card readers in 4,000 more vending machines. This is the fourth deal between the two companies in the past 18 months bringing the total number of vending machines already or soon to be equipped with the MasterCard-subsidized e-Ports to 17,500.
Contactless Vending Gains 4,000 More Machines with Latest Pact
USA Technologies Inc., a Malvern, Pa.-based vendor of card-reading devices for vending machines, this week announced another pact with MasterCard Inc. that will put USA Technologies’ e-Port G6 magnetic-stripe and contactless payment card readers in 4,000-plus more vending machines. The deal represents the fourth between the two companies in the past 18 months and brings to 17,500 the number of vending machines already or soon to be equipped with the MasterCard-subsidized e-Ports.
USA Technologies is to “use its best efforts” to secure installation of 4,051 e-Ports in beverage-vending machines throughout the country, with MasterCard paying the supplier $395 for each successful installation, according to a USA Technologies filing with the Securities and Exchange Commission. The total will be just over $1.6 million if all are installed by the target date of Dec. 31. USA Technologies is required to refund a pro rata share for each uninstalled device as of that date.
MasterCard and USA Technologies first announced a partnership in July 2006 involving 1,000 machines owned by The Philadelphia Coca-Cola Bottling Co. that would be outfitted with e-Ports. That November they followed up with a deal involving 5,000 more in Cadbury Schweppes Americas Beverages machines. The third and biggest pact came in May and involves 7,500 e-Ports to be installed in Coca-Cola Enterprises Inc. vending machines. All but 500 machines under that agreement had e-Ports installed by Oct. 31, the filing says.
USA Technologies executives were unavailable for comment Wednesday afternoon, but the filing calls the payments from MasterCard a part of MasterCard’s “PayPass seeding initiative.” A MasterCard spokesperson refuses to talk in detail about it, but says it’s part of MasterCard’s effort to keep PayPass ahead of the pack in contactless, and, noting that e-Ports also read magnetic stripes, to build new acceptance venues for cards in general. “To get people to behave a certain way, or pay a certain way, you build critical mass,” he says.
In a letter to shareholders on Monday, USA Technologies chairman and chief executive George R. Jensen Jr. said the company installed a monthly record of 5,000 e-Ports in Coca-Cola Enterprises machines during October. For the first fiscal 2008 quarter ended Sept. 30, USA Technologies’ wireless network processed 1.8 million non-cash transactions totaling $7.3 million compared with 650,000 transactions totaling $4.3 million during the year-earlier quarter. The company posted record revenues of $3.36 million in the quarter, up 67% from a year earlier. That didn’t overcome reduced e-Port prices and higher selling and other costs that resulted in a net loss of $5.26 million compared with a loss of $3.68 million in the year-earlier quarter.
Despite the loss, the company had $25 million in cash and cash investments on hand as of Oct. 31, partly due to a $15 million private placement of 2.14 million shares of stock at $7 per share. USA Technologies will use the placement to buy more e-Port devices for its new “Quick Start” program aimed at getting the devices deployed quickly by giving vending machine owners a no-money-down option with monthly payments of $24.95 for hardware rental and associated wireless network services.
Next up: a possible move into credit card processing, according to USA Technologies’ latest annual and quarterly reports with the SEC. “The company is also considering the possibility of becoming a credit card processor (rather than a merchant as is currently the case),” the first-quarter report says. “We believe that becoming a credit card processor would enable us to increase our processing revenues and gross profits.” The report doesn’t say when the company would make a decision.
USA Technologies also recently entered into a contract with an undisclosed manufacturer with the intention of getting a lower price on the e-Ports. If successful, USA Technologies has committed to buy at least $3.6 million worth of the devices over 18 months, the quarterly report says.